May 20, 2013

Written by

L.L. Brasier and John Wisely

Detroit Free Press Staff Writers

Oakland County is vowing to take its fight against Fannie Mae and Freddie Mac to the U.S. Supreme Court in an effort to get millions in real estate transfer taxes from the mortgage giants.

The county was dealt a blow in the battle Monday when a federal appellate court tossed out its lawsuit seeking $12 million in unpaid real estate transfer taxes. The county says it’s owed $1.5 million and the State of Michigan is owed $10.5 million.

The county filed suit in June 2011 against the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, known as Freddie Mac, saying the lenders owed taxes dating back to 2005. The two lenders argued that since they were created by federal charter, they are government entities and therefore exempt from taxation.

U.S. District Judge Victoria Roberts ruled in favor of Oakland County and the State of Michigan last year. She also agreed to allow Genesee County to file a class action on behalf of other counties in Michigan.

But the Sixth Circuit Court of Appeals, in its ruling Monday, said the law was clear: The two lending agencies — which handle about half of all the nation’s mortgages — do not have to pay the real estate taxes. When a property is sold, the state charges $7.50 for every $1,000 worth of value, and counties charge $1.50.

“We doubt that Congress would have said defendants were exempt from ‘all taxation’ if it only meant they were exempt from personal property taxes,” the three-member panel said in a unanimous opinion. “This cannot be correct and this conclusion is not supported by the plain language of the statute.”

The panel ordered the case be sent back to Roberts, and for her to rule in favor of the lenders.

Oakland County Treasurer Andrew Meisner, who instigated the lawsuit, said he and the county were prepared for a fight.

“When we set out to make Fannie Mae and Freddie Mac pay their fair share of transfer taxes, we knew it was going to be a battle and that we were going up against companies with a lot of influence,” he said.

Noting the agencies frequently behave like private corporations — trading on the New York Stock Exchange and setting salaries unregulated by government officials — he said, “We feel that they can’t have it both ways. I anticipate we will be marching up the steps to the United States Supreme Court.”

Fannie Mae spokesman Andrew Wilson said the lender would not be making any comments.

“We will let the decision speak for itself,” he said.

County Executive L. Brooks Patterson issued a news release saying the county always thought the case would end up at the Supreme Court.

“We’ll continue the fight on behalf of our taxpayers because Fannie and Freddie owe county and Michigan taxpayers millions of dollars,” his statement said.